The last time B.C. Ferries placed a big order for new ships, it went overseas because the deal was so compelling it couldn鈥檛 be passed up.
There will be much interest over the next few months to see which shipyard makes the winning bid this time. The big issue for most people won鈥檛 be the price or the terms. It will be whether new B.C. ferries are built in B.C.
Seaspan 91原创 Shipyards is the sole B.C.-based shipyard to qualify for bidding for the right to build three intermediate-class vessels.
The Queens of Burnaby and Nanaimo, circa 1965, which usually sail Comox-Powell River and Tsawwassen-Gulf Islands respectively, are to be replaced, with the third new one to serve as a spare.
Nine yards around the world responded to an early call for interest and the field was narrowed down to five. The entrants are from Turkey, Poland, Norway and Germany, as well as Seaspan.
The German shipyard 鈥� Flensburger Schiffbau-Gesellschaft 鈥� is the same firm that built the three big Coastal-class vessels, as well as the Northern Expedition.
And based on that contract, it is a tough competitor for Seaspan to go up against.
The German yard turns out ferries like Nissan produces cars. The boast at the time it won the contract in 2004 was that it hadn鈥檛 gone over time or over budget in 20 years.
The contract allowed B.C. Ferries to put only 20 per cent down during the three-year construction phase, which saved financing costs.
The rest wasn鈥檛 due until the ships arrived on our coast and went through a host of sea trials. The yard guaranteed it would meet every specification, with graduating penalties if any ship fell short.
(For example, $160,000 a day off the purchase price for every tenth of a knot they fell short of the specified maximum speed.)
Pricing was locked in as well. If the price of steel dropped, three-quarters of the savings went to the buyer. If it rose during construction, the ferry price remained fixed.
Terms like that compelled the company to take the obvious political hit for going off-shore and signing the deal strictly on dollars and cents.
But things are different this time around.
Seaspan is in a much better position than it was nine years ago. The North 91原创 shipyard won a good chunk of the federal ship-procurement strategy and is well into a major upgrade of its facilities.
In 2004, there was some doubt whether it could have done the job even if it had been awarded the contract. This time around, the big question is whether Seaspan can slot the work into its building schedule.
Things are different at B.C. Ferries as well. In 2004, it was completely independent of government, as stipulated when the B.C. Liberals restructured the system to divorce it from political interference.
Then-CEO David Hahn had carte blanche to do as he saw fit. In the subsequent nine years, the government has dived back into the business of intervening in B.C. Ferries operations.
So if cabinet decides it doesn鈥檛 want to face a fresh round of complaints about stiffing B.C. shipyard workers and exporting B.C. jobs, there鈥檚 ample recent precedent for stepping in to ensure things happen the way the government wishes them to happen.
Also in the mix is a federal duty on foreign-built ships. There was to be a $100 million-plus levy on the three Coastal-class ships and the Northern Expedition. After years of negotiation, it was waived by the federal government.
Whether B.C. Ferries gets another waiver 鈥� if the contract goes to a foreign supplier 鈥� depends on circumstances, including the size of the ships. But based on the last application, the decision looks to be an intensely political one.
Everyone would love to see them built in B.C. But the corporation is flat broke and can鈥檛 afford any sort of premium, if one is needed to make that happen.
It will come down to a number of balancing acts by bidders, the corporation and the government.
